Stocks of Saudi Arabian banks declined after they reached settlements worth SAR 16.7 billion ($4.5 billion) with the kingdom’s tax authority over an Islamic levy. A slump in oil prices last week added to the sell-off.

The Tadawul Banks Index retreated as much as 3.1 percent at the open, the most in two months, before easing its decline to 1.8 percent as of 10:33 a.m. local time. All but one of its 12 members fell. The main Saudi equity gauge lost as much as 2.1 percent, the most since November.

The tax authority had extended the 2.5 percent religious levy, known as the Zakat, by including items that were previously exempt while eliminating some deductions. The lenders had previously appealed against the extension.

Meanwhile, Brent crude, the kingdom’s biggest source of revenue, plummeted 11 percent last week to the lowest level in more than a year. The 120-day correlation between Saudi stocks and oil is at the highest level in more than two years.

Al Rajhi Bank, the second-biggest Saudi lender by market capitalization, was hit with SAR 5.41 billion, the highest payment among its peers. The shares, which sank as much as 5.7 percent on Sunday, trimmed their drop to 2.5 percent.

Even though the settlement removes a cloud for Saudi banks that has been “hanging around for a while,” the banks were expecting a much better outcome, said Edmond Christou, a Dubai-based analyst at Bloomberg Intelligence. “They were aiming for a middle ground. For example, Al Rajhi Bank provisioned for a worst case outcome of SAR 5.2 billion, and the settlement turned out to be 5.4 billion riyals. So really this is the worst outcome for the industry from a bank’s perspective.’’

The retreat on Sunday eases the banking index’s gain this year to 25 percent. That’s still more than four times the increase in the main stock gauge.